Grain Elevator Profit Margins Could Increase in 2018

A new report from CoBank says 2018 could bring an increase in profit margins for grain elevators. The report cites a weak harvest basis, along with low transportation rates, and other issues for the prospect of improved profit margins.

A CoBank researcher also says a large carryover and another huge crop have “created an attractive carry in futures markets, particularly for wheat,” adding that current market conditions will provide elevators with better returns year-over-year if they are able to purchase the grain. U.S. ending stocks for corn and soybeans in 2018 are currently estimated to be the largest since 1987 and 2006, but stocks-to-use ratios remain manageable.

However, the supply situation for wheat remains more burdensome, with large stocks expected to continue to weigh on the market in the coming year. The report says that because of the large supplies, localized storage shortages have developed in the Western Corn Belt, especially Nebraska, Iowa and Kansas.